In recent times, various Commonwealth and State funding programs (for example National Stronger Regions Fund, Building Better Regions Fund, Restart NSW, Royalties for Regions) have provided capital injections for infrastructure in regional areas. Whilst these funds ensure marginal projects get over the line the economic and social benefits are felt much more widely. Not only is there a short-term stimulus from the construction phase, there are considerable longer term and sustainable benefits from the operating outcomes of the project and the flow-on effects from it, especially from those that require new workers to relocate to the region.
For example, a recent capital project in regional Australia analysed by AEC involved a $200 million capital cost over two years that generated 128 full time jobs but which also provided 154 ongoing full time jobs to the region. When accounting for families these 154 jobs will result in 400 new people to town, or a population increase for this region of 1%. Other than the project’s supply chain what are the other real economic and social opportunities that can be delivered from such a stimulus? Let’s have a look at some of these opportunities and how local government or economic developers can take advantage of them.
Residential Property
New people to town need housing. Depending on where the new people are coming from they are likely to be looking for a reasonable standard of housing. In advance of the project the future demand is likely to stimulate the local residential construction sector. Assuming a supply of suitably zoned land, there will be a lift in residential lot production and the marketing of house and land packages. These will be taken up by investors but in addition, others may seek to make their properties more attractive for either sale or rental and embark on alterations and additions. Its relatively easy therefore to see how the local residential construction sector might benefit. However, to be of maximum benefit the following factors should be in place:
There is sufficiently zoned residential land.
Subdivision and building approvals processes are well understood and encouraged.
Investors have a positive short and long term view.
Local government has a direct role to play in all three of these factors.
Retail Goods & Services
A larger population means more retail expenditure. The new potentially higher paying jobs may lift the average per person retail expenditure. This provides an opportunity for existing retailers to improve turnover but also for any vacant retail space to become more attractive as retailers and potential retailers see opportunity. This is also a time for local governments to re-examine the region’s retail offer and leakage (retail expenditure spent outside the area) and attract and encourage retailers to fill retail gaps.
Tourism & Hospitality
A larger resident population means more visitors, specifically those visiting friends and relatives. The visitor journey and stay needs to be a fulfilling one to encourage re-visitation and positive word of mouth promotion. This is a good time for local governments to consider their visitor offer and visitor markets and identify product gaps or better ways to supply visitors with information. Thinking about a region as a destination in terms of access, accommodation, attractions, activities, amenities and awareness is one way to identify investment opportunities for the future.
Education and Training
In our example, not only will there be an injection of school aged children there are also likely to be demand for post school or adult education. Whilst the numbers involved are not highly stimulatory they could just be sufficient for a government school to attract that additional funding or teaching resource.
Sporting Clubs & Facilities
Most communities have a plethora of sporting clubs and facilities. It is often up to the local government to supply and maintain sports grounds and other facilities. Again, the new people to town are a source of new talent and a resource that can improve the levels of activity in communities or demands on facilities and may prompt a rethink on service delivery.
Community Facilities
Local governments are generally responsible for supplying and maintaining community facilities such as performing arts centres, museums, community halls, swimming pools, showgrounds, etc. A population increase may provide that additional boost to lift the supply requirement to the next benchmark and thereby provide a stimulus to redevelop the art gallery or attract a better standard of performance.
Industrial Land Development
Similar to residential land, a region needs a good supply of industrial zoned land. As manufacturing, transport, logistics and warehousing evolve new facilities are required to enable businesses to compete effectively and efficiently. Local government’s role in industrial land development is similar to that mentioned for residential above.
Transport
Finally, transport encompassing road, rail and air will be impacted. More people means more cars and trucks on the road, not just local trips but also long distance. Perhaps the additional volume of traffic is sufficient to significantly upgrade roads or consider the bypass again. Perhaps there is a need to look at public transport – both locally and longer distance. Is there now sufficient demand to campaign for an improved rail service? Or maybe a case can be made for increased regular air passenger transport and an upgrade to the airport terminal.
The above are just a few thought provokers about how an infrastructure stimulus and accompanying population increase can be thought of in terms of the economic and social opportunities that could be pursued by local government.
AEC has many years’ experience in identifying and quantifying the economic and social impacts of infrastructure projects and in economic development strategies. For more information please contact Ashley Page at ashley.page@aecgroupltd.com.